Adoption of Green Innovation by Smes: A Sectoral Analysis

Abstract

Small and Medium-sized Enterprises (SMEs) constitute the backbone of Ghana’s economy, accounting for approximately 90% of all businesses and playing a critical role in employment creation and economic growth. In recent years, the growing global emphasis on environmental sustainability has placed increased attention on the capacity of SMEs to adopt green innovations. This study examines the extent, drivers, and performance implications of green innovation adoption among Ghanaian SMEs, drawing exclusively on secondary data from reputable sources including the Ghana Statistical Service, World Bank Enterprise Surveys, and United Nations Development Programme (UNDP) reports. The analysis revealed a steady but uneven increase in adoption across sectors, with agriculture and industry leading, and the service sector showing slower progress. The findings also demonstrate that green innovation adoption is driven by a combination of external pressures and internal capacities. Regulatory enforcement, environmental certification requirements, and market demand from eco-conscious customers and foreign buyers were key external motivators. Access to finance, technical training, and the presence of sustainability-oriented leadership within firms emerged as important internal enablers. Together, these factors created a conducive environment for the uptake of eco-friendly technologies and processes. The results further showed that SMEs adopting green innovations consistently outperformed their non-adopting counterparts in revenue growth, productivity, and environmental compliance. These benefits appear to stem from cost savings through resource efficiency, enhanced market opportunities, and improved reputational capital. The study contributes to both theory and practice by applying the natural resource-based view (NRBV) theory to the Ghanaian SME context, demonstrating how environmental capabilities can yield strategic advantage. Policy implications highlight the need for targeted green finance schemes, sector-specific technical support, and regulatory frameworks that incentivize sustainable practices.